Nancy Sarnoff: Plans fall through, so empty hotel coming down

Published 5:30 am, Monday, September 27, 2010

This abandoned building, formerly known as the Sheraton Hotel, at 711 Polk has been purchased by Brookfield Office Properties, which plans to tear it down.

This abandoned building, formerly known as the Sheraton Hotel, at 711 Polk has been purchased by Brookfield Office Properties, which plans to tear it down.

Photo: Christopher Patronella Jr., Chronicle

Nancy Sarnoff: Plans fall through, so empty hotel coming down

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An abandoned downtown building — once on track to become a luxury hotel — is meeting with the wrecking ball instead.

Major downtown landlord Brookfield Office Properties purchased the long-abandoned Sheraton-Lincoln Plaza at 711 Polk last week and announced plans to raze the derelict structure, which has sat vacant for almost 25 years.

The old hotel is one of about a half dozen abandoned buildings downtown.

"It's hard to say you're thrilled to see a building come down but I feel it's progress," said Bob Eury, president of Central Houston. "We're moving forward here."

It will take about a year to dismantle the 28-story tower, which can't be imploded because it's too close to an adjacent building, Total Plaza, also owned by Brookfield, said Paul Layne, an executive with the company.

Layne wouldn't say how much Brookfield paid for the Sheraton building, which sits on about 35,000 square feet of land, but he said tearing it down, adding a landscaped surface parking lot and restoring three levels of underground parking beneath it will cost more than the building.

'The wherewithal'

After a few years and a couple of delays, the multi-block, mixed-use project proposed for Dunlavy and Allen Parkway is still moving forward, the developer said.

The project, Regent Square, will be built at the site of the Allen House Apartments. Many of the apartments have long been demolished to make way for what's still to come: 400,000 square feet of shops and restaurants, 1,000 apartments, 500 condominiums and 240,000 square feet of office space. A hotel is no longer in the plans.

Construction was supposed to start in 2008, but a redesign delayed it, the developer said.

Now it's the capital markets.

Construction financing is limited nowadays. Bigger loans are more challenging to find.

"There's been limited appetite for the scale of construction loan this project requires," said John Darrah of Boston-based GID Urban Development Group, who declined to comment on exactly the scale.

Last year, when Houston City Council agreed to assist GID with up to $10 million in reimbursements, the project was said to be valued at $850 million.

The current timetable is for the first phase to break ground in late 2012.

That will include about half the overall retail space, 650 apartments and 150,000 square feet of offices.

Recent activity on the land is initial site work in preparation for construction, Darrah said.

And the posh sales center that went up near the site last year won't open to the public until the groundbreaking date gets closer.

"GID has the wherewithal and determination to deliver the project," Darrah said.

Ties to Blockbuster

Houston-based Weingarten Realty Investors was on a list of publicly traded real estate firms that say Blockbuster is a top tenant. The Dallas-based video chain filed for Chapter 11 bankruptcy protection last week.

SNL Real Estate said the Houston-based real estate investment trust had 42 leases with the video retailer at the end of the second quarter.

According to the report, 0.79 percent of the company's annualized rental revenue came from Blockbuster. That's down from 51 leases and 0.87 percent in the same period of 2008.

SNL said most U.S.-based companies that list Blockbuster as a top tenant reported fewer leases with the rental chain than they did more than a year ago.